Apple stockpiles inventory as it braces for 'significant supply constraints'

Apple is grappling with major supply chain challenges triggered by surging demand for hardware components due to the generative AI boom. Outgoing CEO Tim Cook described the situation as a "hundred-year flood on memory pricing," severely impacting the cost of producing iPhones, MacBooks, and other devices.

Despite this, Apple reported its "strongest June quarter ever" with iPhone sales growing 22% year-over-year and Mac sales up 29%, both beating expectations. However, the company is bracing for even worse memory shortages, dubbed "RAMageddon." The biggest challenge is securing advanced memory nodes used in Apple's silicon chips for A-Series and M-Series processors.

"We continue to expect high levels of demand. However, with less flexibility in supply chain, we expect the impact from the supply constraints to increase significantly sequentially," Cook said on the quarterly earnings call. He added that Apple is "seeing some very significant constraints currently with limited flexibility in the supply chain to remedy it."

In response, Apple has dramatically increased its inventory. The company reported $11.1 billion in inventory, nearly double the $5.7 billion reported last September. This marks a shift from Cook's long-held approach of minimizing inventory.

These constraints led Apple to "reluctantly" raise prices on Macs and iPads last month. Other companies like Meta, Samsung, Microsoft, and Sony have also raised hardware prices.

For the upcoming quarter, Apple forecasts revenue growth of 9% to 11% year-over-year, down from about 16% in recent quarters. This worried investors, and Apple stock dropped 6% in after-hours trading.

When Senior VP of Hardware Engineering John Ternus takes over as CEO in September, the company may face a rough patch, but Apple is not alone in its supply struggles.